UPDATED 13:17 EDT / OCTOBER 21 2015

NEWS

Latest EMC earnings provide clues of post-takeover future

With the countdown to its merger into Dell Inc. now officially underway, EMC Corp.’s latest earnings report is set to receive a great deal of scrutiny from an industry keen on understanding the new balance of power that will emerge in the aftermath. Within the numbers lie the first hints of the direction that the combined juggernaut plans to take in its competitive course.

EMC’s Information Storage business, which accounts for the bulk of the $67 million that Michael Dell is shelling out for the deal, saw revenue climb three percent on a constant currency basis in the third quarter and dip two percent overall. Analysts have been struggling to reconcile the stagnation in demand for its traditional arrays with the lofty growth promises that the executive has been making since the announcement of the merger.

But Michael Dell brushed aside those concerns in an interview with Fortune yesterday, saying that the absorption of EMC’s portfolio will enable his company to offer customers a broader choice of hardware. That includes first and foremost in the flash segment,  which stood out as the only source of growth for the company’s struggling storage business this past quarter.

Most notably, EMC’s XtremeIO solid-state memory arrays witnessed a triple-digit revenue increase that it says puts the series on track to passing the one-billion dollar annual bookings mark by the end of the year. The jump is reflective of the broader gains in the company’s Emerging Storage division, which also includes its software-defined management solutions and rose 32 percent on a constant currency basis.

But in a recent blog post discussing the merger, Michael Dell reserved his highest praises for VMware Inc., which he termed the “crown jewel” of the EMC federation. It’s not hard to see why: The subsidiary saw revenue from its virtualization software shoot up 14 percent in the third quarter to generate a hefty $1.67 billion in revenue, beating analyst expectations once again.

That puts VMware second only to Pivotal Inc. in growth. The cloud analytics specalist, which is jointly owned by the hypervisor maker and EMC, increased its revenue 18 percent in real terms over the same period. Yet despite the assurances made in his post, it remains unclear exactly how Michael Dell plans to exploit the high-growth assets his company is gaining through the purchase without undermining the other components of the federation.

Overall, EMC saw revenue increase five percent on a constant currency basis to $6.08 billion, slightly above the average estimate of the analysts surveyed for  the Zacks Consensus. Adjusted earnings stood at $0.25 per share.

Image via Wikimedia

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